3.17What is a bonus share?
1What is it?
Bonus shares are free extra shares given to existing shareholders from the company’s reserves, in a fixed ratio.
2Why does it exist?
It rewards shareholders and increases the number of shares. Like a split, the price adjusts so the total value stays roughly the same.
3Stock market example
Reliance issued a 1:1 bonus in 2024: for every 1 share you held, you got 1 extra. The share price roughly halved on the ex-date.
4Calculation
Bonus a:b means a new shares for every b held
- You hold 30 shares at ₹900. 1:2 bonus = 1 new for every 2 held.
- New shares = 30 ÷ 2 = 15 → total 45.
- Adjusted price ≈ ₹900 × 30 ÷ 45 = ₹600.
- Value: 45 × ₹600 = ₹27,000 (same as 30 × ₹900).
More shares, same value.
5Quick revision
- Bonus = free shares from reserves.
- Price adjusts down; value unchanged.
- Face value stays the same (unlike a split).
6Knowledge check
Q1. You own 100 shares; company gives 1:1 bonus. How many now?Show answer
200.
Q2. Difference between a split and a bonus?Show answer
In a split face value falls; in a bonus face value stays the same and reserves turn into share capital.
Q3. Does a bonus increase your wealth immediately?Show answer
No, the price adjusts.
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